• The House voted 217-215 to approve the GOP’s bill to raise the federal debt limit and cut federal spending, though White House press secretary Karine Jean-Pierre said the bill had “no chance of becoming law,” and it is unlikely to pass the Democrat-controlled Senate. The White House has held firm in its stance that Congress should raise the debt ceiling without conditions, but a possible default on U.S. debt approaches in as few as six weeks, and President Joe Biden and House Speaker Kevin McCarthy (R-Calif.) currently have no plans to meet again on the issue. (The Washington Post)
• First Republic Bank has not been able to secure a bidder for its assets, and government officials are waiting to see if the private sector will step in before addressing possible solutions, people close to the situation said. First Republic is looking for an “open bank” solution that would allow it to keep operating while unloading some assets, but large U.S. banks are reluctant to take on the short-term losses from buying such assets and think they could do better in a “closed bank” deal that takes place after the Federal Deposit Insurance Corp. puts it in receivership. (Financial Times)
  
• The Senate Health, Education, Labor and Pensions Committee advanced the nomination of Julie Su as labor secretary on a party-line vote. Su, who served as Biden’s deputy labor secretary since 2021, may face a tougher crowd in the full Senate, where several Democrats and independents are still undecided on the matter as she continues to draw opposition from business groups. (The Hill)
• U.S. companies operating in Europe could be subjected to European Union rules that require them to disclose data on how their operations affect climate change, including emissions data, unless the Securities and Exchange Commission adopts its own rules, which have been in progress for more than a year amid opposition from industry groups and Republican lawmakers. New SEC rules would open the door for E.U. regulators to grant U.S. companies a waiver, E.U. officials familiar with the matter said. (The Wall Street Journal)

Worth watching:

• Internal Revenue Service Commissioner Daniel Werfel will testify before the House Ways and Means Committee in a “Hearing on Accountability and Transparency.”
• The chief executives of Experian PLC, TransUnion and Equifax Inc. will testify before the Senate Banking Committee in an oversight hearing on credit reporting agencies.

Consumer Spending Dropped Sharply in March

Morning Consult

The debt limit debate revealed Biden’s climate bill will cost $200 billion more than expected.

Jim Tankersley, The New York Times

One interesting subplot to the debt limit bill debate on the House floor today: It has inadvertently shown President Biden’s signature climate change initiatives might be more expensive — and more popular — than previously estimated.

Biden Runs on an Improved, but Still Troubled Economy

Harriet Torry and Rosie Ettenheim, The Wall Street Journal

President Biden launches his re-election campaign facing voters soured on a U.S. economy with high inflation, climbing interest rates and a strong but cooling labor market.

Ken Griffin’s Suit Over IRS Data Leak Should Be Tossed, US Says

David Voreacos, Bloomberg

The US asked a judge to dismiss a lawsuit by hedge fund manager Ken Griffin against the Internal Revenue Service after the billionaire accused the agency of failing to protect his confidential financial information. The Citadel founder seeks financial damages over a data breach that led to ProPublica’s publication of private data about some of the wealthiest US taxpayers.

Rep. Spanberger urges committee to hold hearing on banning Congress members from stock trading

Dave Kovaleski, Financial Regulation News

U.S. Rep. Abigail Spanberger (D-VA) is urging the U.S. House Committee on House Administration to hold a hearing on efforts to ban Members of Congress and their families from trading individual stocks while serving in Congress.

GDP Report to Show Pace of U.S. Growth in First Quarter

Austen Hufford, The Wall Street Journal

A government report on U.S. economic output in the first quarter will shed light on how consumers and businesses are faring under high inflation, rising interest rates and the onset of banking problems.

Strong US consumer spending seen driving economy in first quarter

Lucia Mutikani, Reuters

The U.S. economy likely continued to grow at a solid clip in the first quarter, driven by strong consumer spending at the beginning of the year, but momentum appears to have since waned considerably as the effects of higher interest rates spread. The Commerce Department’s advance first-quarter gross domestic product report on Thursday will probably show the economy nowhere near a recession.

Durable-goods orders get Boeing boost, but waning investment sends out bad vibes for the economy

Jeffry Bartash, MarketWatch

Orders for manufactured goods got a boost in March from new contracts for passenger planes, but more broadly, business investment fell again in another sign the U.S. economy is slowing. Durable-goods orders jumped 3.2% last month, the government said Wednesday.

Goldman Sachs sees late July deadline for hiking debt limit

Brian Faler, Politico

The government is unlikely to hit the drop-dead date for raising the debt limit until late July, Goldman Sachs said Wednesday.

Bank Turmoil Seen Crimping Credit at Double Powell’s Estimate

Steve Matthews and Kyungjin Yoo, Bloomberg

US bank stress will tighten credit by twice as much as expected by Federal Reserve Chair Jerome Powell, said economists surveyed by Bloomberg, tipping the economy into recession.

Menendez rejects any substitutes in push for Latino Fed nominee

Victoria Guida, Politico

Sen. Bob Menendez (D-N.J.), a central player in the White House’s search for a new Federal Reserve vice chair, isn’t backing down from his push to see a Latino candidate nominated to the Fed board.

Bank stress likely to lead to tighter lending, corporate defaults, Bank of America credit survey shows

Reuters

Bank stress will likely be limited to a small number of banks but lead to tighter lending conditions and a pick-up in corporate defaults, a Bank of America April credit investor survey released on Wednesday showed.

At Charles Schwab, Being a Big Bank Has Become a Big Problem

Annie Massa, Bloomberg Businessweek

Bob Thompson describes his retirement as quiet and happy. He lives in Indianapolis with his Welsh terrier, Stella, covering his expenses with savings he amassed over four decades as an accountant. He entrusts those savings to an advisory and financial planning firm, which in turn runs major parts of its business through a gold-standard mainstay of American finance: Charles Schwab Corp. “I had a really good impression of Schwab,” Thompson says.

Who’s getting laid off in America, by salary range

Nate DiCamillo, Quartz

Usually in economic slowdowns, it’s low-income workers who get cut first, but the recent increase in unemployment insurance (UI) claims in the US has been more broad-based.

Summers Says Inflation Won’t Get Back to 2% Without Downturn

Claire Ballentine, Bloomberg

The former Treasury secretary said he is ‘not that optimistic’ about the fight against rising prices and that the Federal Reserve lost credibility by acting too slowly.

Deutsche Bank to cut 800 jobs after strong first quarter

Tom Sims and Marta Orosz, Reuters

Deutsche Bank is to cut 800 jobs in a new cost-saving drive after reporting a bigger than expected rise in profit for the first quarter, a volatile period globally for finance companies.

SVB’s former parent may need new funding after $2 billion cash seizure

Dietrich Knauth, Reuters

Silicon Valley Bank’s former owner may need to take out a bankruptcy loan amid uncertainty about the U.S. Federal Deposit Insurance Company’s seizure of $2 billion in cash from the company, its attorney said Wednesday.

First Republic Bank Is a Problem With No Easy Solution

Ben Eisen et al., The Wall Street Journal

A regulatory seizure would bring its own set of problems.

New paper says stablecoin regulation could pull 20% of deposits from banks

Claire Williams, American Banker

A newly-published paper from a prominent financial regulation scholar predicts a significant flight of bank deposits from traditional banks should lawmakers and regulators require that the tokens are backed by special reserves that can satisfy withdrawal requests.

Regional US banks claimed easier capital rules would turbocharge loans

Stephen Gandel and Colby Smith, Financial Times

Lending at PNC, US Bank and Capital One trailed industry average following 2019 regulatory relief.

Speed of US bank failures to play starring role in Fed, FDIC post-mortems

Hannah Lang and Ann Saphir, Reuters

Of all the facts that have emerged about last month’s two U.S. bank busts – the unanswered warning letters from regulators, the ignored interest-rate risk, the outsized levels of uninsured deposits – one data point in particular continues to stir deep-seated unease among finance officials: 36.

Goldman shareholder criticizes CEO Solomon’s leadership at annual meeting

Tatiana Bautzer, Reuters

A Goldman Sachs Group Inc shareholder criticized its Chairman and CEO David Solomon on Wednesday at the bank’s annual meeting and proposed its board appoint an independent chairman.

Barclays posts 27% rise in net profit for the first quarter, beats expectations

Jenni Reid, CNBC

Barclays on Thursday reported net profit of £1.78 billion ($2.2 billion) for the first quarter, beating expectations and coming in 27% higher year-on-year.

The 401(k) generation enters a retirement minefield

Felix Salmon, Axios

Americans retiring now are going it alone: They’re the first generation to rely on private savings instead of pensions to navigate the financial vortex of retirement. 401(k) plans and IRAs don’t generate steady and predictable income like pensions or social security. The result is a feeling of perpetual insecurity, even among those who’ve amassed substantial savings.

Investors defy Goldman and BofA in vote for climate finance plans

Attracta Mooney and Aime Williams, Financial Times

Lenders under pressure on emissions as shareholders go against board recommendations

BlackRock adds Treasuries as debt ceiling jitters intensify

Davide Barbuscia, Reuters

BlackRock has been buying U.S. Treasuries in anticipation of an economic slowdown and a protracted fight between the U.S. government and Congress around the debt limit, BlackRock Chief Investment Officer of Global Fixed Income Rick Rieder said on Wednesday.

FHFA’s Thompson pushes back on criticism of mortgage fee changes

Bonnie Sinnock, National Mortgage News

Federal Housing Finance Agency Director Sandra Thompson sought to clarify in a statement issued late Tuesday that the government-sponsored enterprises’ latest mortgage fee adjustments are aimed more at risk management than incentivizing an expansion of borrowing.

CFPB warns debt collectors on zombie seconds

Brad Finkelstein, National Mortgage News

The Consumer Financial Protection Bureau put out an advisory opinion warning that debt collectors seeking balances, interest and fees on long-ago defaulted piggyback second-lien loans are violating the Fair Debt Collections Protection Act.

Vanguard expects home prices to drop 5% in the second half of 2023

Aarthi Swaminathan, MarketWatch

The world’s second-largest asset manager, Vanguard, expects headwinds for the U.S. housing sector in the second half of this year. The company said Wednesday that it expects home prices to drop 5% on an annual basis in 2023.

GOP senators demand details on impact of Biden mortgage rate changes on borrowers

Emily Jacobs, The Washington Examiner 

Senate Republicans are demanding details on the Federal Housing Finance Agency’s new mortgage rate pricing shifts that could force people with good credit ratings to pay increased fees to subsidize high-risk mortgages.

Profit Margins Are Sliding for Americans Who Sell Their Homes

Alexandre Tanzi, Bloomberg

With the benefit of hindsight, millions of US homeowners inclined to sell would have been better off doing it last spring.

Use of mortgage points soared in 2022

Andrew Martinez, National Mortgage News

Homebuyers in last year’s high interest rate environment bought mortgage points in around half of all loans originated, according to a new Zillow analysis.

Inflation still putting housing out of reach for many Americans

Adam Barnes, The Hill

The cost of household goods and utilities is cutting into Americans’ budgets and creating further housing strife for many while the average tenant is already rent burdened.

Crypto’s Cure for a Shrinking Customer Base: Buy Government Bonds

Vicky Ge Huang, The Wall Street Journal

DeFi platforms take a page from traditional finance’s playbook to boost yields.